Q: Founded in 1957, Fairchild Semiconductor was a pioneer in the semiconductor industry and has become a mainstay in Silicon Valley. What do you believe have been the major turning points of change and innovation in the semiconductor industry over the last 54 years?

A: There have been many turning points in the evolution of the semiconductor industry. One that comes to mind was the establishment of the foundry business model, as it enabled many new semiconductor companies to be created without the hurdle of building wafer fabs. This has helped maintain or increase the pace of product-oriented innovation for decades.

Another turning point was the advent of digital technology in all things related to communication. This not only improved the power efficiency, performance and quality of the user experience (think CDs vs. albums, and digital vs. analog cell phones), but it also put many applications on the cost and performance learning curve known as Moore's Law.

One turning point we are currently experiencing is the use of semiconductor technology to improve power efficiency. This is very evident in the level of functionality we can now get in smart phones while maintaining good battery life. Additional areas include the use of brushless direct current (DC) motors instead of alternating current (AC) induction motors in many industrial and home applications, and the use of switching regulators instead of linear regulators in most all power supplies. In all of these areas, new semiconductor technology is at the heart of the advancement in power efficiency.

Q: Tell us about some of Fairchild's new, innovative high-performance power and mobile products and how these products enable engineers to drive innovation in their designs.

A: Fairchild offers a substantial portfolio of semiconductor technology that addresses a broad range of requirements in power-dependent, mobile and other industries.

As a power technology leader, Fairchild offers a unique combination of functional, process and packaging innovation with the industry's best power management expertise. We are a global leader in delivering energy-efficient power analog, power discrete and optoelectronic solutions that maximize energy savings in power-sensitive applications.

Some examples of Fairchild's industry-leading solutions include SuperFET metal oxide semiconductor field-effect transistors (MOSFETs) that achieve world-class Rds(on) and provide higher power density reducing heat sink size; Green Fairchild Power Switch (FPS) devices that offer state-of-the-art standby power to support the industry's 1W initiative; and power factor correction (PFC) ICs that increase system efficiency.

Fairchild's mWSaver technology offers best-in-class power savings for power supplies by enabling standby power ratings below 50 mW. By using Fairchild's mWSaver technology, power supply manufacturers can now achieve the ultra-low standby power performance their customers want, while eliminating components and lowering bill-of-material (BOM) costs.

Fairchild is also a leader in mobile technology, with a wide portfolio of analog and power IP that can provide improved functionality while conserving space and power, thereby helping customers achieve user satisfaction and market success. These functions include audio, video, Universal Serial Bus (USB), application-specific standard product (ASSP)/logic, radio frequency (RF) power, core power and lighting.

In fact, Fairchild addresses one of the most significant challenges facing audio applications in the mobile industry today—the need to meet consumer demand for multimedia mobile devices that offer smaller speakers that sound louder and better, while minimizing impact on battery life. Two such solutions, the FAB1200 and FAB2200 stereo Class-G ground-referenced headphone amplifiers, address this need. The FAB1200 and FAB2200 mobile audio ICs make handsets, tablets/mobile Internet devices (MIDs) and other portable audio applications sound louder and better while reducing overall systems cost and minimizing the impact on battery runtime.

Q: While business is ever-evolving, what best practices have remained static at Fairchild and implemented to provide customers with "solutions for success"?

A: "Customer Success" is Fairchild's number-one guiding principle. This can be seen in the commitment of the entire company, from product designers to manufacturing experts and our field application engineers (FAEs), all working to anticipate and address customer needs.

The willingness of Fairchild to listen and respond to customers is key to the company's ability to meet the unique requirements set out by power and mobile manufacturers and design engineers. We work closely with customers to address the critical business issues they face—from challenging design problems and accelerating time-to-market to differentiating their products.

Another time-tested best practices area is the supply chain. A comprehensive, responsive and efficient supply chain is critical to our global customers. While it's easy to agree that customers need products to be delivered where and when they want them, it's not easy to do day in and day out. A dependable supplier is a valued supplier, which remains a competitive advantage in all market segments as product trends come and go.

Q: In the first half of 2011, Fairchild held its annual Fairchild Paper Contest "to encourage innovation and identify technology opportunities and individuals (undergraduate and graduate students) who can help shape the future of the company." While investment at the university level is important to drive the next wave of innovation, do you also feel that investment by the larger, more established semiconductor companies in today's start-ups is also required with most venture capitalists exiting the industry?

A: While the number of venture-backed start-ups in the semiconductor industry is down significantly, they remain an important source of innovation and new products. While we do not have a formal "venture fund," Fairchild seeks out and engages start-ups in a couple primary ways. One is to partner with them in a complementary manner to help with elements of the "whole product" or to become an additional channel to the market. A current example of this is the partnership with ZMDI in Germany, where Fairchild's driver MOSFET (DRMOS) power train was engineered concurrently with their digital power controller, and now we are both channels to the market for the technology. Another way we engage start-ups is as an investor, usually in conjunction with a development or marketing activity.

Fairchild is constantly monitoring the start-up space, and we make acquisitions to fill technology needs and accelerate growth. Two acquisitions in the last year alone were Jyve, an inertial sensor (gyro and accelerometer) company in the mobile space, and TranSiC, a silicon carbide company in the power management space. A successful exit is a fundamental motive for venture-backed start-ups, and Fairchild looks for successful start-ups that can help accelerate growth.

Q: Many argue that the steep increase in chip design costs is stalling innovation. Which of these factors contribute most to the high cost of design: mask costs, electronic design automation (EDA) tools, deep submicron design, complexity? Why?

A: The dynamic of increasing IC chip design costs is most acute in large digital very large-scale integration (VLSI) products. The vast majority of Fairchild's products is analog and mixed-signal and contains less than 50,000 gates—so this is less of an issue for us. That being said, EDA costs remain a significant portion of IC development for analog products, and masks costs go up with each technology node, even in the 0.35μm to 0.13μm range.

Q: Fairchild used the popular tagline "No matter where you go, there we are," highlighting the many end markets it serves. However, what end market is Fairchild most excited by, and which do you consider to hold the greatest opportunity?

A: There are a few markets where Fairchild expects continued growth. Fairchild is excited by the motor drive end market. According to the United States Department of Energy (DOE), appliance motors take up approximately 20 percent of all electric energy consumption in a typical household. As a result, the industry is addressing this concern with new, energy-efficient products, and semiconductor manufacturers are aiding in this transition with innovations in motor drives.

As they become more popular, inverter-based systems are expected to be more compact, have built-in control and a lower overall cost. Inverter drive modules meet those needs and are a conventional alternative to discrete-based inverters. Fairchild addresses this need and has developed innovative motor solutions that ensure high efficiency, reliability, smaller packaging and greater design flexibility for energy-restricted applications.

Mobile is another market with great opportunity, specifically smart phones and tablets.

The replacement market for handsets drives a significant portion of handset sales, as users—and many mobile calling plans—look to upgrade phones, features and technology every two years. For handset developers, this creates a design cycle that introduces multiple phone models every year, with most custom-tailored for a highly targeted niche.

Unlike other markets such as televisions and computers, mobile phone suppliers have mastered the art of identifying the needs of a specific market segment and developing products that make their customers feel as though the product was developed specifically for them. To do this, phone suppliers have designed phone models around a specific baseband, application processor and chip set. They then customize that design with add-in features using Fairchild solutions, resulting in multiple variations from a base design. This allows them to add in features without the need for major design changes.

To meet these demands—rapid design cycles, increased functionality and decreased power consumption—handset designers require partners that can offer the latest technology that meets their specific challenges.

By listening to the major mobile manufacturers and, in fact, anticipating their needs with customized silicon solutions, we enable leading handset brands to maintain a competitive edge.

As an innovator in the market, Fairchild combines silicon IP building blocks and system-level expertise for solutions enabling mobile manufacturers to quickly customize their designs, bringing an array of products to meet their needs. And with the increasing popularity of smart phones and the rate at which consumers are upgrading their mobile devices, we see un-ending potential in this market.

Q: According to Semico, the analog IC market will not follow the slow growth trend of the overall chip industry in 2011, growing 13.8 percent. Is Fairchild seeing evidence of this growth within the company? If so, what is driving this growth?

A: As we reported in our latest earnings announcement, we are seeing demand continue to grow in the mobile segment using signal path and power management analog products. We also know the rate of conversion from single-speed AC motors to variable-speed inverter-type motors will drive continued growth, even in a weak unit sales environment for major home appliances. This is also true for automotive and industrial markets where increased silicon content continues to be the primary growth driver. Solar inverters are another market that will eventually be a source of strong growth.

Q: Gartner reported that semiconductor inventory entered Q3 at "worrisome" levels and that balance won't be restored until Q2 2012. What is Fairchild doing to ensure they finish 2011 with a leaner inventory position?

A: While industry inventories are at a local high, they are not worrisome from a historical perspective. Compared to past business cycles, Fairchild has instituted new distribution resale information processes and is already more aggressively managing channel inventory. So without further negative macro-economic developments, this is an inventory correction cycle in the normal range, and we are proactively limiting inventory levels.

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